Saturday 21 April 2012 16.06 EDT
First published on Saturday 21 April 2012 16.06 EDT

Andrew Lansley, the health secretary, is threatening another controversial revolution in the NHS by proposing that its staff be paid less if they work in poorer parts of the country.

The cabinet minister is backing a plan for regional pay, which would mean that nurses, midwives, hospital porters, cleaners and paramedics would earn less if they work in the north or the Midlands rather than in the south of England. Official documents reveal that the only exemption backed by the Department of Health would be for highly paid managers working in new bodies established to deliver Lansley's controversial NHS reform programme, widely criticised as a privatisation of the health service.

The department, according to a submission to the NHS pay review body, believes special arrangements would be necessary for this new cohort of executives to "attract and retain high-calibre leaders and staff responsible for transforming delivery".

The revelation was seized upon by the government's critics on Saturday night as fresh evidence that the coalition is out of touch with the British public.

Health unions accused the health secretary of seeking to drive down wages in the provinces with the crippling consequence of creating an ever deeper north-south economic divide. They said women would be particularly badly hit by the proposals.

The policy is also likely to reignite disputes within the coalition over Lansley's handling of the NHS, with one senior Liberal Democrat attacking the proposal as "divisive and ideological" and warning that regional pay in the NHS was a "red-line issue" for Lib Dem MPs.

John Pugh MP, the co-chairman of the Lib Dem parliamentary policy committee on health and social care, said: "Not content with cementing the divisions between the north and south, Andrew's proposals harden the divisions between the well-paid and the rest. This demonstrates his continuing, unfortunate talent for alienating the people he needs to rely on most: NHS staff.

"Regional pay proposals and the blinkered ideology that underpins it remains a red line for many Lib Dem MPs and risk provoking an enduring, embittering standoff within the coalition which will profit no one."

Lansley's recommendation was made in response to the call by the chancellor, George Osborne, in his recent budget for the public sector to be "more responsive to local pay rates" to help the private sector grow in economically depressed parts of the UK.

Osborne argued that public sector pay should mimic the private sector and be more reflective of local economic conditions. In written evidence to the independent NHS pay review board, Lansley's department agrees that there is a prima facie case for regional pay in the NHS, described in the document as "market-facing pay".

The document suggests setting a national basic pay rate at a "minimum level necessary" and paying additional supplements in particular geographical zones. It says: "Current rates of pay in the NHS do vary geographically, but significantly less so than the pay of comparable staff in the private sector. The introduction of more sensitive market-facing pay would therefore enable more efficient and effective use of NHS funds." It further argues that "where the NHS pay premium is relatively high there is the potential for private sector enterprise to be crowded out with adverse impact on the prospects for local economic growth."

The document says the department favours a "measured approach, at least initially", and recommends the "introduction of one, or perhaps two, additional zones of geographical pay differentiation." It adds: "These could then be assessed and the evidence base on market-facing pay further developed to permit the consideration of the case for introducing further additional zones in the future."

The pay row is set to escalate when the shadow health secretary, Andy Burnham MP, addresses the Unison health conference in Brighton this week. Burnham said: "National pay is part of what underpins a truly national health service. Labour will defend it, as it is fair to staff, helps control costs and brings stability to the system.

"It is often harder to work on the NHS front line in more deprived parts of the country and yet this government wants to pay those staff less and reinforce the north-south divide. It will infuriate NHS staff to see senior managers arguing for one rule for themselves, and another for staff. They are seeking to insulate themselves from these changes, while driving down pay for thousands of front-line staff across the country."

Christina McAnea, the head of health at Unison, the largest health union, which will present its evidence on regional pay on Monday at its health conference, said: "The Department of Health's evidence on regional pay is built on sand. For a government that says it wants to cut paperwork, introducing regional pay would be a massively expensive, bureaucratic nightmare, designed to cause huge disruption and conflict.

"Regional pay would cause skills shortages in so-called low-cost areas, with nurses, midwives and specialised staff being hard to recruit and retain, hitting the care of patients.

"The government want to introduce a market ethos into the NHS but most private companies abandoned regional pay scales years ago as divisive and unworkable."

The Department of Health said: "Our evidence shows how more market-facing pay could help employers make better use of the NHS pay bill. It makes clear that there is a compelling case for implementing market facing pay for all Agenda for Change staff in England, whether they fulfil a support role, work in administration or work on the front line, such as nurses and other clinical staff. The principle of equal pay applies to all staff across the entire country.

"Any recommendations must be implemented in a way that is simple, effective and safe. National organisations like Health Education England are however in the very early stages of development.

"We have therefore invited the NHS pay review body to consider how, in the absence of detailed evidence about the appropriate job markets, their recommendations on market-facing pay might affect recruitment and retention, including the implications for equal pay in these particular organisations."